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Can this be real? Inside a Goldman Sachs trader's twilight zone

Michael Lewis

"I want to steamroll the opposition": Former Goldman Sachs mortgage trader Deeb Salem claims he has been cheated out of millions by the bank.

Bloomberg reporter Michael Moore was recently given a brief, tantalising glimpse of transcripts from the case against Goldman Sachs brought by one of its former mortgage traders, Deeb Salem.

Though he had been paid $US35 million ($37 million) over six years in his job, Salem argued in February before a panel of US securities industry regulator Finra that, back in 2010, he had been cheated out of millions by the bank.

“Let’s be very clear," Salem testified, "I was one of the most sought-after investment professionals in the mortgage industry.” Goldman Sachs, he claimed, was punishing him for his 2007 "self-evaluation" form, later made public by a US Senate investigation, in which he boasted of having manipulated the market for subprime mortgage bonds so that he might bet against them at higher prices.

“I am as competitive as Michael Jordan," Salem wrote to his superiors, to tell them something about himself. "I don’t just want to win; I want to win every time and I want to steamroll the opposition.”

As evidence that he had been led to believe his bonus would be nearly twice what he received, Salem introduced his mother. She'd been staying with him during Christmas 2010, after her home had burned down. Just before his disastrous bonus meeting he had told her what his superiors at Goldman had promised him.

The transcripts offered a partial view of the inner workings of both Goldman's bonus politics and the minds of the people to whom Goldman pays the most money. Alas, the day after it appeared, Goldman succeeded in getting all documents from the dispute sealed. And yet, somehow, perhaps as the result of a technical glitch inside Goldman Sachs, one document has still slipped through. We publish it without comment:

"Dear Mama:

First, let us dispense with further loose talk about the fire that burned down your home. As I have said, repeatedly, I am willing to testify under oath, or, if necessary, upon your grave, that I did not set this fire. Despite our explicit verbal agreement, which you made just after taking your pain medication, I have decided to disgorge to you the proceeds from your home insurance policy -- though you will admit that the policy was indeed in my name, and that it was I, not you, who shrewdly arranged for the insured value to be wildly inflated. But please do not request further financial assistance. I am hurting here.

I write to report a tragedy: My notional superiors have failed to award me the $US13 million they promised to me. I told you of this promise over Christmas, as you will soon remember. My spectacular decision to short the subprime mortgage market, after manipulating that market so that my short could take place at artificially high prices, is the stuff of legend. In spite of what many refer to as "The Triumph of Deeb," they have elected to pay me the disgraceful sum of $US8.25 million, making vague promises to "make it up to me in the future."

I can hear you saying, "Deeb, what is the matter with you? I raised you to take what is yours plus some of what belongs to others and you are failing me," or "Deeb, when will you learn to guard your narrow interests in spite of any social consequences, as I have taught you?" Before you lambast me, and my character, I will tell you that I will not be taking this lying down. I will soon go to battle with Goldman Sachs. In this battle, I will require your assistance.

On your last visit you stated that the contents of my old bedroom had been salvaged and were now in storage. This is most unfortunate. Goldman will stop at nothing to avoid paying me what I am worth. I am concerned they will attempt to use various items from my childhood against me. Please travel to the storage facility and destroy the following:

the soccer trophies on the base of which are scratched out the word "Participant" and etched "League MVP";

the thick bundle of letters from grade school teachers who agreed, under my Kobe Bryant-like assaults on them, to change the unfair grades they originally bestowed upon me; and

the list of nicknames I once considered for myself, to replace the slanders (Douche Bag Deeb, Deeby Doo Doo) hurled at me by my grade school inferiors. If memory serves, said list looks something like this: Deeb the Devastator, Slammin' Salem, Deeb the Magnificent,Salemenella, Deeb the Conqueror, Deeberry Best.

Next, we must accept the risks of this communication. I know enough about "ordinary folk" to know that they will never understand what it feels like to be me. They can have no idea how difficult it is for me to make bets with billions of dollars of other people's money, knowing that, if the bets work out, I will receive only tens of millions. They may even seek to ridicule my plight, if you can believe that. Do not worry: I will crush all detractors, in time.

Meanwhile, we must find ways to pressure Goldman Sachs. We can do this publicly, by releasing documents to reporters that will embarrass them. This is quite easy: The firm is desperate to keep its name out of the press, and so virtually any document will do. I, on the other hand, am incapable of feeling the slightest embarrassment or shame. Advantage moi.

We can also pressure Goldman privately -- but here the matter becomes delicate.

In the coming weeks you will almost certainly be contacted by Goldman or its representatives. They may even invite you to a job interview. Do not be fooled into thinking they will actually offer you a job -- this is merely a tactic, now used by all big Wall Street banks, to extract information from you. Knowing this, you can turn this encounter to our advantage. Dear Mother, you are still a very attractive woman, and still possess many provocative articles of clothing. I would never suggest that you compromise your virtue in any way, of course. But to catch the eye of Lloyd Blankfein -- who, while perhaps a bit short for you, is perfectly age-appropriate -- you must do whatever it takes. Be Like Mike! Just Do It!

Alone with Lloyd you may need to forget -- for the briefest of moments -- that he is the enemy. Charm him. Use your wiles -- and then spring upon him my appeal.

There is no need to scream or gesticulate. Simply say, "Before we proceed, I will need Deeb's $US7 million" and then detach yourself from him and wait coolly for his response. After the deal is done, and you have the check in hand, please do remind Lloyd that in the year he paid me just $US8.25 million he paid himself nearly $US20 million. Inequality is one of the great problems of our age. He needs to set a better example.

Dearest Mother, I have but one final demand. I must firmly insist that you destroy all documents related to your purchase from me, in 2007, of subprime mortgage bonds. Yes – sigh -- I was indeed short those bonds. I was under no obligation to disclose this fact to you, or anyone else. Indeed, to do so would have constituted a breach of my deepest and most solemn obligation -- to myself.